From Strategy Development to Utilization of Quantitative Modelling in a Trading House
In order to improve the assessment of its portfolios, our customer from the energy sector was looking to introduce quantitative modelling in its business. We assisted the customer in adjusting its IT, processes and strategy so that it was possible for him to use quantitative modelling in a profitable manner. Due to the white-box approach that was chosen it was possible to continually adjust it to changes on the market and within the business itself.
Initial situation and challenge
Turmoil in energy markets, complex market and contract structures and a lack of know-how within the company highlighted the need for quantitative models for the purpose of pricing complex energy portfolios, performing (risk) assessments and portfolio optimization. These complex models should not however be used as “Black Box” solutions, as they must support the corporate strategies, organizations and processes. Theoretically complex models must be capable of practical use and adjusted constantly in line with changes in the markets.
Solution / approach
The consulting approach of EXXETA began with an analysis of the required pricing and risk models and the documentation of requirements in relation to IT development plans, process landscapes and corporate strategies. Following this, suitable model families were selected, individually adjusted and further developed as necessary. These were used for the consistent assessment of, among others,
- ToP contracts
- Multi-commodity contracts
- Gas reservoirs
In addition to the preparation of the content models, one focal point of our consulting related to the transfer of knowledge in order to set up an internal Quant department for our customer.
Thanks to the successful consulting approach, profit-optimized portfolio management, sophisticated risk controlling and market-oriented pricing for complex multi-commodity portfolios were achieved. Due to the chosen “White Box“ approach, which enables ongoing calibration in line with market changes, it was possible to reduce model risks while increasing usability. Our customer received customized solution packages, which were embedded in its IT landscape, company processes and strategies.
- Big Picture: holistic consulting approach from the analysis to introduction and training
- Know-how: provision of cutting-edge quantitative models from the EXXETA solutions portfolio, developed in cooperation with the university Eichstätt-Ingolstadt
- Suitable for daily use: even our complex models are easy to use during normal daily business